The Ethics and Compliance Initiative (ECI) recently released a report, “Ethical Leadership Around the World and Why It Matters,” as part of its Global Business Ethics Survey. Among the results, researchers found that ethical leadership is key to lowering ethics and compliance risk. Unfortunately, they also found that leaders tend to have a more positive perception of their own and their organization’s integrity and ethical behavior than their employees do. Fortunately, leaders, with the support of L&D organizations, can take steps to improve their ethical leadership skills.

What Is Ethical Leadership?

Mike Esterday, CEO of Integrity Solutions, defines ethical leadership as “doing the right thing because it’s the right thing to do.” Beyond that, he points to integrity as a key value, saying that in a study of Fortune 500 companies, the most common professed value (identified by 57 percent of the companies) is integrity.

Ethical leaders…

  • Make difficult decisions to reach good results for employees and the organization
  • Can “build trust and be trustworthy” (Esterday)
  • Focus on the organization’s purpose
  • Work to develop their employees and care authentically about their success
  • Hold themselves accountable for behaving ethically
  • Behave with integrity and in a way that clearly aligns with the values of the organization

Developing Ethical Leaders

In addition to lowering risk, ethical leadership has other benefits for businesses, which have great incentives to develop training on the topic. Esterday says organizations led by ethical leaders tend to have higher employee engagement and lower turnover. Ethical leaders also encourage achievement drive, which Esterday says is equally or more important than knowledge and skills; research earlier this year by Integrity Solutions and the Sales Management Association found that organizations that address values, attitudes and achievement drive in training report a 20 percent increase in revenue. ECI’s research found that “top managers’ commitment to workplace integrity is related to employee retention” and less “observed misconduct.”

The Positive Impact of Ethical Leadership

Image used with permission from the Ethics and Compliance Initiative

Esterday says the most important point is to address ethics in leadership training. “Too many companies focus on product knowledge, job skills and factual knowledge. These are foundational and required, but it’s passion and the sense of purpose that drive people to excel.” He adds that ethics should be included in training for employees who don’t hold leadership positions, as well.

Pat Harned, CEO of ECI, says that the most effective way to teach ethics to leaders is through “case-driven or conversation-driven training programs” and also recommends encouraging leaders to talk with their employees about how they can improve. Leaders, she says, should understand the actions and communications that demonstrate their values to employees as well as what to do when their employees report misconduct. The ECI report states that top managers have unique challenges; they have fewer peers, so it’s important to help them “develop supportive relationships with internal and external colleagues.”

Measuring Ethical Leadership

Measuring ethical leadership and the success of training programs can be difficult, but it’s not impossible. Esterday says “complaints and accolades,” while lagging indicators, are still measures of ethical behavior. Organizations can also use employee surveys to evaluate ethical behavior and integrity among leaders. Questions, according to Harned, can include asking the extent to which:

  • Top managers talk about the importance of ethics
  • Employees trust their leaders
  • Leaders model the ethical behavior they demand from others
  • Employees are held accountable for their behavior
  • They would fear retaliation if they reported misconduct
  • They feel comfortable reporting bad news or suggesting new ideas

Harned says it’s also important to develop performance metrics based on ethical behavior to hold leaders accountable.

In an age where ethics, or the lack thereof, can make or break a leader’s career and mean the difference between success and failure, it’s critical that organizations be able to identify ethical leadership and develop managers who behave with integrity and accountability. Following these tips will help.

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